Funding the Federal Government for FY 2026 – Compounding the Uncertainty

Congress’ effort to complete action on the bills to fund the government for FY26 that begins October 1, 2025 faces unprecedented uncertainty. There is a very high probability that short-term continuing resolutions will be required this Fall and it is quite possible that Congress will once again resort to a full-year, formula -based, continuing resolution, like it just did for funding the government for FY25.

Once again, significant delays in procurement decisions are expected.

Both Speaker Johnson and Senate Majority Leader Thune have expressed their strong desire to complete the FY26 appropriations process through so-called “regular order”, i.e., sending twelve individual appropriations bills to the President.

I fully intend for us to consider the FY 2026 appropriations bills on the floor. My goal is to schedule floor action for every fiscal year 2026 appropriations bill that comes out of the committee, where they can be debated, amended, and passed for further negotiation with the House.

Majority Leader Thune (R-SD) March 13

President Trump’s detailed FY26 Budget will not be delivered to Congress before the week of May 19. It will take months for the Congress to digest the significant structural reforms that the President is expected to propose for domestic and international affairs programs (e.g., eliminating the Department of Education, USAID, substantially reorganizing HHS, EPA, and VA) and the “trillion dollar” budget the President has said he will request for national security programs.

Beginning the FY26 appropriations process requires the House and Senate to adopt spending toplines. This will be a controversial process. The toplines established in the Fiscal Responsibility Act of 2023 have expired and the budget resolution that the Congress just agreed to for FY25 (H. Con. Res. 14) does not establish toplines for FY26. During President Trump’s first term, the Senate balked at the substantial reductions in non-defense spending that the President proposed.

Both the House and Senate will need to adopt FY26 budget resolutions or so-called “deeming resolutions” to set a FY26 topline, which will take time, particularly with leadership focused over the next few months on the “one big beautiful reconciliation bill.” President Trump has pushed for a permanent extension of the 2017 Trump tax cuts, increases in spending for defense, border security, energy, significant cuts in mandatory spending, and a $4-5 trillion debt limit increase. Notwithstanding the Republican Leadership’s desire to finish that bill by the end of May, it could easily take until early August to complete (recall that in 2017, it took until December to enact the Trump tax cuts).

Debating toplines and moving appropriations bills without knowing how much funding will be approved for defense and border security in reconciliation is likely to delay House and Senate action on appropriations and the FY26 National Defense Authorization Act into the fall.

Further complicating the road forward on drafting appropriations bills will be the lack of agreement on the extent to which the President can unilaterally impound or cancel funding approved by Congress. The FY25 full-year continuing resolution (PL 119-4) includes a requirement for every agency to submit to Congress a detailed spend plan for FY25 by April 29, 2025. These spend plans (assuming they are delivered) will give Congress the first official information on the extent to which grant, contract, and salaries and expenses funds are being canceled or delayed. Without a firm understanding of how FY25 appropriations are being spent (or not spent), it will be very difficult to find the bipartisanship required to negotiate and pass the FY26 bills.

It is also expected that the President will, in the coming weeks, propose a $9-10 billion rescission bill that eliminates existing funding (for FY25 or previous years), which will distract the Congress from the FY26 process.

The President’s seeks to eliminate significant regulations across the government. Asserting that he has the authority to bypass the rulemaking process and eliminate rules will inevitably result in efforts to use the appropriations process to block these efforts.

Finally, it is not clear that the President will want to sign individual appropriations bills. What if Congress completes a Labor/HHS/ Education bill that funds the Department of Education? What if Congress rejects his efforts to significantly reduce funding for EPA and the State Department (as Congress did in 2017-2020)? The President may decide he likes the flexibility that the full-year FY25 CR gave him and insist on a similar full-year CR for FY26.

Bottom line – It is a bumpy road ahead, inevitably delaying decision making.